We have a spreadsheet that tracks our savings [of course], where they are and what they are earning. One strand of our savings is a chunk of premium bonds and what this lovely spreadsheet reveals is that the amount of our winnings from these premium bonds has decreased [okay let’s be honest, it has halved] over the last three years. In 2014 and 2015 we received a return of around 1.5% from our winnings on the fluctuating amounts of premium bonds we held but last year our return was only 0.75%.
I was bought up in a rural post office and so have always been a little sentimental about premium bonds as before the internet it was the local post office where you bought your premium bonds. My parents were in a premium bond club, where a handful of neighbours pitched in every week and bought a premium bond for one member of the club, this way they received a premium bond every month or so. I remember the excitement at home when they occasionally won a few pounds. I have also long had a soft spot for ERNIE, the Electronic Random Number Indicator Equipment that chooses the winners each month but it seems ERNIE doesn’t have the same loyalty towards me and it might be time to part company.
And yet, we will miss the excitement of the win. These days we receive an email when one of our premium bonds has been chosen by ERNIE and there is always much heart pounding and nail biting in the BOTRA household until we have checked our account, followed by inevitable disappointment when we find we have not won a life changing amount but just another £25.
In the Money Saving Expert article from October 2016 premium bond winnings are discussed. Apparently premium bonds are the number one saving product in the UK, with over 21 million people having at least one, although no doubt many of these people have forgotten all about the one or two bonds they own. Although any winnings are still tax free, the changes to tax on interest in the UK make this aspect of premium bonds less appealing today. The article describes much better than I can that, although the annual prize rate is currently 1.25%, this does not represent the winnings you are likely to receive and that with £31,000 saved in premium bonds each month one in 240,000 people will win nothing at all.
Premium bonds are really a lottery [after all there is a chance of winning anything between nothing and a whole shed load of money] but at least it is a lottery where you don’t lose your capital. Mr BOTRA and I have agreed that sentimentality is not always the best way to decide where to save and despite my childhood memories of premium bonds the numbers are pushing us to reconsider this aspect of our savings.